Indirect taxes have constantly evolved in
India. Now, that the One Hundred and First Amendment Act of the
Constitution of India has been enacted, the citizens of India have been
greeted by GST. Not to mention it has created ripples in the financial world.
Which brings us to the fact, what is GST
and how it can impact each citizen of the country? If we have to explain things
in a simplified way, it is the comprehensive Goods and Services Tax. The
imposition of GST in India, that is the Indian system of indirect taxation is
said to be a revolutionary step as it has rationalized
indirect taxes in India.
In a nutshell, GST will create a
single market as it will replace all indirect taxes
in the country.
With the advent of this much-awaited goods and services tax on the 1st
of July, The various departments of the
governments are ensuring that the transition of the former tax regime to the
present tax regime is smooth. Not without
reason, GST has caught the imagination of the teeming millions and said to be one of the biggest financial reforms since the
independence.
The
Effect of GST on the Entire Population
Whether it is good or bad, it is difficult
to gauge now but it has impacted just about everyone right from the small
shopkeeper to the greatest of a businessman,
nobody has been able to avoid the impact.
GST converges about 15 different taxes and levies and amalgamated and
unified the entire country into one common market which has a single tax
structure. This ensures the smooth transferring of goods from one end of the
country into another, across different territorial borders without any hurdles.
The
long and short of GST
The
GST Tax is a comprehensive, multi-stage, tax which is
destination-based, that will be levied upon on all value additions.
What is multi-stage and how can we explain
it? A good or an item follows an entire gamut of steps right from manufacture
to the final stage of production. When you buy the raw materials it will be
regarded as the first stage. The next stage is all about the production or
manufacture.
Then again there is another stage which
involves the warehousing of materials. The next obvious step is selling off the product to the retailer.
Finally, you have the retailer selling you
the product, thus completing the journey and ending up with the consumer.
So
let us understand this process with an example, suppose a manufacturer wants to
make a shirt. For the same, he has to buy the
yarn. Then it gets turned into a shirt after manufacture.
So, the value of the yarn immediately
increases when it is made into a shirt.
When the manufacturer sells it again to the
warehousing agent who labels and attaches price tags to the shirt. So like this
value keeps on rising and when the warehouse sells it to the retailer who
invests in the marketing and increases the value still further.
GST will be imposed on all these value
additions and this helps achieve the final sale to the end customer.
Goods and Services Tax will also be imposed on
all transactions right from the starting process
to the end process and that means the whole manufacturing chain.
The chief reason of having one consolidated
indirect in place of multiple existing indirect taxes is to help build a strong
economy and hopefully, the GST will live up to its ever-increasing
hype and hoopla. There are
various accounting firms in the
country such as chartered accountantfirms in Chennai which will guide you through the entire process of unraveling GST and make sure you are able to
keep yourself financially afloat.
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